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Dollar/yen at 111.50 – it is no mistake. The Bank of Japan announced further monetary stimulus to battle falling inflation expectations and showed it is determined to reach its goal.

USD/JPY was trading under 109.50 before the announcement and shot 200 pips higher and continues to trade in a volatile manner.

Update: 111.52 seems to be the peak for now, as the pair settles around 111.15.

The move

The BOJ, led by Kuroda, announced that the monetary base is set to rise to 80 trillion yen. It will triple the pact of the annual buying of JREITS and ETF. It is set to increase JGB buying by 30 trillion per year. The duration will be extended by 7-10 years. The Nikkei 400 is eligible for buying as well.

It was a close call: the 9 member council voted 5:4 in favor of this decision. Some members voted against expanding the base money target and against extending the duration.

The jump in dollar/yen is the strongest since April 2013, when the central bank first announced its QQE program.

He sees the weakening yen has a positive effect on the Japanese economy.

The BOJ is set to extend its bond maturity buys and sees no problem with negative yields. This is quite comprehensive. The  Bank sees a risk of a  delay in the conversion of the deflationary mindset.

The Japanese economy is in a crital moment in beating deflation. Price expectations in Japan are not firmly anchored. The Bank cannot allow the momentum that is pushing up wages to stop.

Government and GPIF

The BOJ assumes the government will raise the sales tax once again, but does not intervene in this decision. The impact of April’s sales tax rise has been somewhat prolonged. Japanese government spokesman Suga says the government and the BOJ will coordinate on future policy.

More stimulus comes from a change in the GPIF pension fund, but the BOJ  denies any link. The Japanese health ministry will hold a press conference about the GPIF at 8:00 GMT.


BOJ governor Juroda says he doesn’t see a need to further act, but doesn’t rule that out.

The Nikkei stock index is shooting higher.

For more, see the USDJPY forecast

USDJPY above 111 on fresh monetary easing from the BOJ GPIF October 31 2014